When the SD Legislature created the Office of Administrative Hearings under SDCL chapter 1-26C in 1994, did that new chapter override or abrogate the existing hearing procedures the Division of Insurance had been following under SDCL title 58 and chapter 1-26?
Plain-English summary
In 1994, the SD Legislature created the Office of Administrative Hearings (OAH) and a corps of Administrative Law Judges (ALJs) to handle contested-case hearings across state agencies. Before the change, each agency ran its own hearings using its own hearing officers under SDCL chapter 1-26 and its own organic statutes. The Division of Insurance had been doing this under SDCL title 58 alongside chapter 1-26. After the OAH legislation, the Insurance Secretary needed to know how the old procedures and the new structure fit together.
The 1994 AG read SDCL chapter 1-26C as creating new infrastructure without erasing the old procedural rules. The key principle: specific statutes control over general ones (Meyerink v. Northwestern Public Service), and new statutes prevail over old ones only where they actually conflict (In re Estate of Smith). Chapter 1-26C is mostly silent about how it interacts with existing agency-specific procedures, so the AG read it to leave those procedures in place except where there is a real conflict.
Concretely:
Notice of hearing. SDCL 58-4-15 says the notice "shall not be effective" unless signed by the Director of Insurance or by his authority. That insurance-specific rule is more specific than anything in chapter 1-26C, so it still controls. The notice can be signed by the Director or by the ALJ (if the Director delegates the authority).
Who conducts the hearing. The Director may hear the matter personally. If she chooses not to, SDCL 1-26C-9 routes it to an ALJ. The ALJ then proposes findings of fact, conclusions of law, and a decision under SDCL 1-26C-11. The Director retains final decision authority unless she has expressly delegated it to the ALJ under SDCL 1-26C-12.
Informality. Both regimes require informal conduct of hearings (SDCL 1-26C-1 and the pre-existing SDCL 58-4-25 and 1-26-19(1)). No conflict; informality continues to govern.
Party-submitted findings. SDCL 1-26-25 still applies: if parties submit proposed findings of fact, the agency decision must rule on each. SDCL 1-26-24 still requires service of a tentative decision when the ultimate decision-maker has not heard or read the record. Chapter 1-26C-11 does not foreclose the party-submission practice; it co-exists.
Records and files. SDCL 58-2-26 puts record-keeping for the Director's official transactions on the Director. Chapter 1-26C does not transfer agency files to OAH. The OAH receives files for hearing purposes, schedules and conducts hearings, and issues proposed decisions; the agency owns the underlying case file. For convenience, parties may file certain originals with OAH, but the Director retains the responsibility for the overall agency record.
Agency review of ALJ decisions. Unless the Director has fully delegated decision-making under SDCL 1-26C-12, the agency reviews the ALJ's proposed decision under SDCL 1-26C-11. Two structural limits: SDCL 1-26C-13 requires the agency to write its reasons if it rejects the ALJ's proposals, and the agency must give due regard to the ALJ's opportunity to observe witnesses. Judicial review remains available under SDCL 1-26C-11 and SDCL 1-26-30.2.
Currency note
This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL chapter 1-26C and the OAH structure have been amended multiple times since 1994. The Department of Labor and Regulation now houses OAH (the Division of Insurance has also been restructured into the Department of Labor and Regulation's Division of Insurance), and the procedural overlay has been adjusted. Verify the current statute and current OAH practices before relying on this opinion for any modern administrative case.
What the opinion meant at the time
For the Division of Insurance in 1994 to early 2000s, the opinion gave a clean transition map. The Division could keep its existing procedures intact, plug the new OAH/ALJ infrastructure into the hearing step, and continue owning the records and the final decision.
For OAH and its newly-hired ALJs, the opinion mapped the boundary of their role. Conduct hearings, propose findings, defer to agency final decisions absent specific delegation, do not become the file custodian for agency records.
For insurance industry attorneys practicing before the Division, the opinion meant the procedural ground rules they were already familiar with (SDCL 58-4-15, 58-4-25) still controlled, supplemented by the new chapter 1-26C infrastructure rules.
For other state agencies wondering how chapter 1-26C interacted with their organic statutes, the opinion modeled the analysis. Agency-specific procedural rules continue to control where they are more specific than chapter 1-26C; chapter 1-26C fills in the structural gaps.
For administrative law judges deciding how to manage record-keeping during contested cases, the opinion clarified that the agency owns the file. ALJ-side files are convenience copies, not the official record.
Common questions
Q: What did SDCL chapter 1-26C create?
A: The Office of Administrative Hearings (OAH), a centralized state office that provides Administrative Law Judges to conduct contested-case hearings for state agencies. Before chapter 1-26C, each agency had its own hearing officers.
Q: Did chapter 1-26C abolish the old SDCL chapter 1-26?
A: No. Chapter 1-26 (the general Administrative Procedures Act) continues to apply. Chapter 1-26C adds new structural and procedural provisions on top of it. Where they conflict, chapter 1-26C controls. Where they do not, both apply.
Q: Do agency-specific procedural rules (like SDCL title 58 for insurance) still control?
A: Yes, where they are more specific than chapter 1-26C and do not directly conflict. The "specific over general" canon (Meyerink) keeps the agency-specific rules in force.
Q: Who owns the agency record?
A: The agency. SDCL 58-2-26 for the Insurance Director, and parallel provisions for other agencies. OAH conducts the hearing but does not become the record custodian.
Q: Can an ALJ make the final decision?
A: Only if the agency has expressly delegated final decision-making authority under SDCL 1-26C-12. Otherwise, the ALJ proposes findings and a decision; the agency makes the final call.
Q: What deference does an ALJ's decision get?
A: SDCL 1-26C-13 requires the agency to give due regard to the ALJ's opportunity to observe witnesses, and to write its reasons if it rejects the ALJ's proposals.
Q: Can parties still submit proposed findings of fact?
A: Yes. SDCL 1-26-25 continues to require the agency decision to rule on each party-submitted finding when the parties submit them.
Q: What about judicial review?
A: Judicial review continues to run through SDCL 1-26C-11 (referring to chapter 1-26 review procedures) and SDCL 1-26-30.2. The OAH layer does not change the appellate path to circuit court.
Background and statutory framework
South Dakota administrative law before 1994 was decentralized. Each agency conducted its own hearings under SDCL chapter 1-26 (the Administrative Procedures Act) and its organic statutes. The Division of Insurance, for example, ran hearings under SDCL title 58 and chapter 1-26, using its own hearing officers assigned by the Director.
The 1994 OAH legislation (SDCL chapter 1-26C) created a centralized hearing infrastructure. ALJs would be employees of OAH rather than of the individual agencies. The goal was efficiency (shared expertise, common procedures across agencies) and impartiality (separating the hearing officer from the agency under whose authority the hearing was held).
The transition raised the integration question. Did the new chapter 1-26C replace the agency-specific procedural rules, or did it sit on top of them? The 1994 AG worked through the canons and concluded the latter.
The "later statute controls" rule (In re Estate of Smith) gives chapter 1-26C priority where it conflicts with chapter 1-26 or with agency organic statutes. But the rule is conditional on actual conflict. Where chapter 1-26C is silent on a topic and the agency-specific rule says something specific, the specific rule still controls (Meyerink).
The "Legislature meant what it said" rule (Crescent Electric Supply) reinforces the reading. The OAH legislation set up the new office and gave it certain powers and duties. It did not say it was abrogating agency-specific procedures, and the AG was unwilling to read that abrogation into silence.
National Farmers Union Property and Casualty Co. v. Bang (a 1994 SD case directly relevant to administrative procedure) supports the same conclusion: chapter 1-26C does not change procedural rules within the Code that do not specifically conflict with it.
The opinion's structural takeaway is durable. New centralized infrastructure does not necessarily flatten existing agency-specific procedures. Each agency keeps its specific rules unless the new statute directly displaces them.
Citations and references
Statutes:
- SDCL chapter 1-26 (Administrative Procedures Act)
- SDCL 1-26-16, 1-26-18.1, 1-26-19(1), 1-26-19.2, 1-26-21, 1-26-24, 1-26-25
- SDCL 1-26-30.1, 1-26-30.2, 1-26-31, 1-26-32.2, 1-26-32.3, 1-26-32.4
- SDCL chapter 1-26C (Office of Administrative Hearings)
- SDCL 1-26C-1, 1-26C-2, 1-26C-6, 1-26C-9, 1-26C-10, 1-26C-11, 1-26C-12, 1-26C-13
- SDCL 1-26C-15, 1-26C-16, 1-26C-21, 1-26C-22
- SDCL 58-2-24, 58-2-26, 58-4-15, 58-4-25
Cases:
- Crescent Electric Supply Co. v. Nerison, 232 N.W.2d 76 (S.D. 1975)
- In re Estate of Smith, 401 N.W.2d 736 (S.D. 1987)
- Meyerink v. Northwestern Public Service, 391 N.W.2d 180 (S.D. 1986)
- National Farmers Union Property and Casualty Co. v. Bang, 516 N.W.2d 313 (S.D. 1994)
Source
Original opinion text
OFFICIAL OPINION NO. 94-10
Office of Administrative Hearings
Dear Secretary Mehlhaff:
You have requested an official opinion of this Office based upon the following facts:
FACTS:
Prior to enactment of SDCL 1-26C, and the utilization by the South Dakota Division of Insurance (Division) of Administrative Law Judges (ALJ) assigned by the Office of Administrative Hearing (OAH), when a hearing was determined to be necessary by the Division, the Division drafted and issued a Notice of Hearing to the interested parties. SDCL 1-26-16 and 58-4-15. If the agency head did not sit as hearing officer, a hearing officer was assigned by the Director and would issue proposed Findings of Fact, Conclusions of Law, and an Order. SDCL 58-2-24 and 1-26-18.1. All administrative hearings conducted on behalf of the Division were conducted with the greatest degree of informality possible. SDCL 58-4-25 and 1-26-19(1). The hearing officer also sent copies of the proposed Findings, Conclusions, Decision, and Order to the parties involved, and provided those parties an opportunity to submit written objections and alternative proposals. SDCL 1-26-24 and 1-26-25. The entire record was also turned over by the hearing officer to the agency head. From that point on, unless the agency head (the person who makes the final decision) decided to remand the matter back for further hearing, the hearing officer would be out of the picture because the agency is responsible for certifying and providing the record on appeal and maintaining permanent records of the proceedings at the Division. SDCL §§ 1-26-30.1, 1-26-31, 1-26-32.2, 1-26-21, 1-26-32.3, 1-26-32.4, and 58-2-26. The agency head would then consider the record, and the objections and alternative proposals, if any, submitted by the parties, and then issue a final decision. The final decision would be mailed by the agency head to the parties, who could then appeal if deemed necessary.
Based upon the foregoing facts, you have asked the following question:
QUESTION:
Does the enactment of SDCL 1-26C have precedence over any of the specific provisions set forth in SDCL Title 58 or SDCL Chapter 1-26, or abrogate any of the procedures followed by the Division of Insurance for administrative hearings as set forth in the facts above?
IN RE QUESTION:
There are several separate, individual procedural actions set out in your factual situation. I will comment briefly on each, but first will answer your question in general. I interpret SDCL 1-26C as establishing the OAH and giving power to the ALJs appointed under that chapter to conduct hearings in accordance with the chapter and in accordance with other preexisting statutes and regulations. SDCL ch. 1-26C is unambiguous, so I must presume that the Legislature said what it meant and meant what it said. Crescent Electric Supply Co. v. Nerison, 232 N.W.2d 76, 80 (S.D. 1975). Further, since SDCL ch. 1-26C is the Legislature's most recent enactment among the laws relevant to your questions, that chapter will prevail if conflicts exist. In re Estate of Smith, 401 N.W.2d 736, 740 (S.D. 1987). However, a statute specific to insurance hearings that conflicts with the general terms of SDCL ch. 1-26C nonetheless controls. Meyerink v. Northwestern Public Service, 391 N.W.2d 180, 183-184 (S.D. 1986). With those principles in mind, I now turn to your specific inquiries.
The chief administrative law judge may adopt procedural rules. SDCL 1-26C-10. After hearing, the presiding administrative law judge is to make proposed findings of fact and conclusions of law and a proposed decision, which the agency may accept, reject or modify. SDCL 1-26C-11. There has been a transfer of hearing officers and administrative staff to OAH. SDCL §§ 1-26C-15 and 1-26C-16. There is also a provision, SDCL 1-26C-13, that gives certain deference to the findings of the administrative law judge, insofar as the findings result from the opportunity of the administrative law judge to observe the witnesses. Credence is given to all past administrative decisions. SDCL 1-26C-21. Beyond these indicators, however, there are few statutory provisions that directly govern the matters you have set out. I remain of the opinion that SDCL 1-26C does not change or abrogate any procedural rules within the Code that do not specifically conflict with it. National Farmers Union Property and Casualty Co. v. Bang, 516 N.W.2d 313, 317 (S.D. 1994).
Pursuant to that opinion, I believe that SDCL 58-4-15 controls the issue of the appropriate entity for the giving of notice of hearing. SDCL 58-4-15 provides that such notice "shall not be effective" unless signed by the director of the Division of Insurance "or by his authority." Thus, the notice of hearing may be signed by the director or by the ALJ, if the authority of the director is delegated to the ALJ.
With regard to the hearing, the director may, of course, hear the matter herself. If she chooses not to hear the matter herself, SDCL 1-26C-9 provides that the case will be heard by an ALJ. The ALJ in turn proposes findings of fact, conclusions of law and a decision to the director who retains the final authority to render a decision, except in those cases in which the ALJ has been properly delegated the ultimate decision-making authority. SDCL 1-26C-11, 1-26C-12. Additional ALJ powers and responsibilities are set out in SDCL 1-26C-6, 1-26C-10 and 1-26-19.2.
SDCL 1-26C-1 specifically provides that the OAH conduct hearings with the greatest degree of informality consistent with fairness in the nature of the proceeding. The individual ALJ, however, has control over the taking of evidence and other matters involved in the administrative hearing. SDCL ch. 1-26C and 1-26C-10. The ALJs nonetheless should take to heart as much as possible the requirements of SDCL 1-26C-1.
You next inquire whether parties ought to be served with proposed findings, conclusions and decisions and provided with an opportunity to submit written objections and alternate proposals. SDCL 1-26-25 provides that "if, in accordance with agency rules, parties submitted proposed findings of fact, the decision shall include a ruling on each proposed finding." (Repeated references to SDCL ch. 1-26 in SDCL ch. 1-26C make it clear that the former chapter's general principles continue to apply. See, especially, SDCL §§ 1-26C-2 and 1-26C-22.) Further, SDCL 1-26-24 requires service of a tentative or proposed decision upon the parties if the officials of the agency who are to render a decision have not heard the case or read the record. Essentially, SDCL 1-26 allows for proposals by parties, but does not require them unless the ultimate decision maker, i.e. the Director of Insurance, has not read the record or heard the case. I am not unmindful of 1-26C-11, stating that the administrative law judge makes proposed findings of fact and conclusions of law and that the agency may accept, reject or modify those findings and conclusions. That statute, however, does not prohibit the practice of allowing the parties to submit proposed findings.
Your next question regards the maintenance of records of the Division of Insurance. It is my opinion that the records involved belong to the Division, not to the Office of Administrative Hearings. SDCL 58-2-26 requires the director to keep records of the director's official transactions. On the other hand, I have found no statute that directly imposes the duty of keeping Division of Insurance Records in OAH. For convenience, it would be acceptable for parties to file certain original documents with OAH. The Director, however, is responsible for her files under SDCL 58-2-26. I see nothing in SDCL 1-26C that would convey agency files to the Office of Administrative Hearings merely because the administrative law judges are conducting a hearing. In my view, the role of the Office of Administrative Hearings is defined and limited, and consists of receiving agency files and records, scheduling and conducting hearings, and issuing proposed findings of fact, conclusions of law and decisions, which are then acted upon by the agency, unless the agency previously has delegated full decision-making authority to OAH pursuant to SDCL 1-26C-12.
Finally, you raise the issue of how the record is considered after the ALJ renders his or her decision. Unless full decision-making authority has been granted pursuant to SDCL 1-26C-12, the agency may review the findings of an administrative law judge as it sees fit. SDCL 1-26C-11. The only limits on Division review of the administrative law judge decision are contained in SDCL 1-26C-13. The agency must, if it rejects the administrative law judge's proposals, give reasons for doing so in writing. It also must give due regard to the administrative law judge's opportunity to observe the witnesses. Further, an appeal from agency action to the circuit court is available. SDCL 1-26C-11; 1-26-30.2.
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